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us stocks surge ahead

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    By Robert Holmes Staff Reporter
    8/10/2005 10:02 AM EDT

    Updated from 9:34 a.m. EDT
    Stocks rose Wednesday as investors continued to celebrate a strong economy despite another Federal Reserve interest rate hike.

    The Dow Jones Industrial Average (^DJI:Index - commentary - research) was gaining 76 points, or 0.7%, to 10,691, and the S&P 500 (SPX:Index - commentary - research) was up 8 points, or 0.7%, to 1240. The Nasdaq Composite (Nasdaq:Index - commentary - research) was adding 10 points, or 0.5%, to 2184. The 10-year Treasury bond was up 5/32 to yield 4.37%, while the dollar fell against the yen and euro.

    "We continue to bounce off and now move away from our support point located near the 1222 level on the S&P 500," said Paul Mendelsohn, chief investment strategist with Windham Financial. "Traders will now focus on the energy inventory numbers, due out at 10:30 AM, the five-year note auction and the Treasury budget figures for July"

    Oil also resumed it uptrend, with September crude recently adding 42 cents to $63.49 a barrel in Nymex floor trading. An Energy Department report later in the day is expected to show small declines in crude and gasoline inventories and a 1.2 million-barrel build in distillate stocks.

    Also Wednesday, Unocal's (UCL:NYSE - commentary - research) shareholders are expected to vote on a $17.8 billion acquisition bid from Chevron (CVX:NYSE - commentary - research). Chinese oil producer Cnooc (CEO:NYSE - commentary - research) abandoned its offer to buy Unocal after political uproar from the U.S. Chevron was recently higher by 47 cents, or 0.8%, to $61.69.

    Stocks ended with gains Tuesday after the Federal Open Market Committee raised rates another quarter-point to 3.5% and indicated no pause in its "measured" campaign of tightening. The Dow ended a three-day losing streak to close up 0.8% at 10,616 while the Nasdaq Composite rose 0.5% to 2174.

    Investors seemed encouraged by the tone of the Fed's economic assessment, which included an observation that "aggregate spending, despite high energy prices, appears to have strengthened since late winter." Policymakers also noted that "core inflation has been relatively low in recent months."

    After the bell, network equipment giant Cisco (CSCO:Nasdaq - commentary - research) reported a solid fourth quarter, with profits up 12% from a year ago to $1.54 billion, or 24 cents a share. Adjusted earnings of 25 cents a share matched the Reuters Research estimate.

    Cisco's stock is trading lower despite guidance that is largely in line with Wall Street forecasts. The company predicted a 10% sequential decline in first-quarter sales and gross margins in the 67% range. That should come out to around 25 cents a share of earnings on revenue that is at or near the consensus estimate of $6.63 billion. Cisco was down 89 cents, or 4.5%, to $18.72.

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